As in the companion case, we hold that the legislature reserved its right to repeal a benefit in the original enactment of that benefit and the enactment did not impair any preexisting contractual right . . . The legislature is allowed to condition its grant of pension enhancements using express language in the statutory provision that creates the right.

At issue in these cases is whether lawmakers had the legal right to make changes to what they said were conditional pension benefit increases.

The unions were challenging whether the statutory language used when granting pension gain-sharing and Cost of Living Adjustments (COLAs) actually gave lawmakers the right to condition these pension enhancements:

The legislature reserves the right to amend or repeal this section in the future and no member or beneficiary has a contractual right to receive this postretirement adjustment not granted prior to that time.

Plaintiffs claim a contract right to billions of dollars in pension enhancements---money that could otherwise fund crucial needs from education to infrastructure repairs---based on a statute that explicitly barred any such right and said that it could be repealed at any time. Their argument misstates both the facts and the law, asking this Court to ignore plain statutory language, invade core legislative powers, and cripple state and local budgets . . .

The state estimates that by eliminating the UCOLA, it will save about $7.6 billion over 25 years, and $870 million in the 2011-13 biennium alone. Those savings will be reflected in lower employer contributions to Plan 1, a defined benefit plan funded by a combination of employer and employee contributions.

In repealing the UCOLA, the State is doing more than merely 'call[ing] upon public employees to share in the sacrifices required of the state citizens to preserve crucial services.' The State is placing an unfair and disproportionate burden on a small group of largely retired persons. It is doing so by eliminating a benefit for which those largely retired individuals have clearly 'paid' in the form of employment services rendered. '[S]acrifices required of the state citizens' should be shared by all citizens through use of general revenue mechanisms.

The decision to go with phased-in pension payments versus adopting the actuarially recommended rate was made without knowing the long-term costs. According to the State Actuary (emphasis added):

It's important to note that funding less than the long-term expectations (100% of Scale BB) will ultimately increase future required contributions should our assumptions prove accurate. We have not captured the long-term impact of these funding shortfalls in this analysis.

Part of what has contributed to the state’s nearly $6 billion unfunded pension liability is that legislators and past governors have not made the required actuarial contributions over the past decade so that lawmakers could spend that money on other programs. Washington’s multi-billion dollar pension problem was not created overnight, so it will take time to pay off these unfunded liabilities. Thankfully the Supreme Court did not make the problem even worse today.

Jason Mercier is Director of the Center for Government Reform at Washington Policy Center and is based in the Tri-Cities. He serves on the boards of the Washington Coalition for Open Government and CandidateVerification, and was an advisor to the 2002 Washington State Tax Structure Committee. Jason is an ex-officio for the Tri-City Regional Chamber of Commerce. In June 2010, former Governor Gregoire appointed Jason as WPC’s representative on her Fiscal Responsibility and Reform Panel.